CAFC Denies Petition for En Banc Rehearing of Australian Therapeutic Decision Despite Contractual Estoppel

The CAFC has denied a petition for en banc rehearing of its July 2020 ruling reversing (and remanding) the TTAB's decision dismissing a petition for cancellation of a registration for the mark NAKED for condoms. The Board had ruled that Petitioner Australian Therapeutic lacked standing because it had agreed not to use or register the mark NAKED for condoms in the United States, and further had agreed that Respondent could use and register the mark, and so Australian did not have a real interest in this proceeding or a reasonable basis for its belief of damage. [TTABlogged here]. A divided panel of the CAFC, however, held that "the absence of proprietary rights does not in itself negate an interest in the cancellation proceeding or a reasonable belief of damage." [TTABlogged here]. Australian Therapeutic Supplies Pty. Ltd. v. Naked TM, LLC, 2020 USPQ2d 11438 (Fed. Cir. 2020) [precedential].

In denying Naked TM's petition, the appellate court stated merely that "[t]he petition for rehearing, response, and amicus brief were first referred to the panel that heard the appeal, and thereafter, to the circuit judges who are in regular active service. A poll was requested, taken, and failed."

Judge Evan J. Wallach wrote a 22-page dissent, expanding on his position that Australian, in light of its agreement, lacked a commercial interest in the NAKED mark, and therefore did not have a valid cause of action against Naked. In Judge Wallach's view, the court's decision:

(1) conflicts with our case law requiring a "legitimate commercial interest" to have a valid cause of action under 15 U.S.C. § 1064, see Empresa Cubana Del Tabaco v. Gen. Cigar Co., 753 F.3d 1270, 1274 (Fed. Cir. 2014) (following Lexmark, noting that a petitioner must have a "legitimate commercial interest sufficient to confer standing"); (2) undermines our case law favoring the enforcement of settlement agreements, see Wells Cargo, Inc. v. Wells Cargo, Inc., 606 F.2d 961, 965 (C.C.P.A. 1979) (“If there [is] a policy favoring challenges to trademark validity, it too has been viewed as outweighed by the policy favoring settlements.”); and (3) raises questions as to the impact of Supreme Court precedent on our statutory standing jurisprudence, see Lexmark, 572 U.S. at 128 n.4 (noting that statutory standing does not implicate Article III subject matter jurisdiction), 134 (providing “a direct application of the zone-of-interests test and the proximate-cause requirement [to] suppl[y] the relevant limits on who may sue”).

Judge Wallach concluded that "[t]here is 'no real controversy between the parties”—they resolved any such controversy between themselves through settlement in 2007—leaving Australian "no more than an intermeddler" in the instant action. Coach Servs., 668 F.3d at 1376 (internal quotation marks and citation omitted); cf. Gould, 866 F.2d at 1392 (“When the case between the parties has been settled, there is no actual matter in controversy essential to the decision of the particular case[.]”). 

The judge asserted that "[e]n banc action is necessary to maintain the uniformity our decisions and clarify the impact of Lexmark on those decisions. See FED. R. APP. P. 35(a)(1)–(2)."

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TTABlogger comment: The Board has already ruled, on cross-motions for summary judgment, that confusion is both likely and inevitable between registrant's mark and petitioner's asserted marks NAKED and NAKED CONDOM for condoms.The Board noted that the defense of contractual estoppel - unlike respondent's defenses of laches, acquiescence, and equitable estoppel - is not "negated by inevitable confusion." So what do you think will happen next at the Board?

Text Copyright John L. Welch 2020.